at the end of each question or part question.
You are advised to spend no longer than 2 hours on Section A.
The businesses described in this paper are entirely fictitious.
You are reminded of the need for good English and clear presentation in your answers.
Calculators may be used.
Section A [70 Marks]
Answer all questions
1 (a) Define the following terms:
(i) management buy-out 
(ii) contracting out 
(b) Distinguish between a public limited company and a public corporation. 
2. (a) List any two types of production methods. 
(b) How can a manufacturer of cellphones improve he productivity of his workers? 
3. Explain any two communication problems that are beyond the receiver’s control. 
4 (a) State and explain any two non-financial methods of motivation. 
(b) Comment on Hezberg’s ideas on motivation. 
5 Is democratic leadership necessarily a good management style? 
6 (a) What is niche marketing? 
(b) Evaluate the usefulness of market skimming. 
7 A firm has to decide between two alternate projects. The costs and the expected profitability of each of
each of these is given below:
|Project||Cost||If successful||If unsuccessful
|X||20 000||60 000||3 000
|Y||35 000||85 000||(20 000)
If there is a 60% chance of Project X being successful and a 50% chance of Project Y being successful,
(a) draw a decision tree of the options above. 
(b) Which project should the firm choose? Justify you answer. 
8 (a) What is benchmarking? 
(b) Assess the significance of maintaining quality in a business organisation. 
9 (a) Outline two advantages of the payback method. 
(b) (i) What is investiment appraisal? 
(ii) Analyse the importance of Net Present Value as a method of evaluating projects. 
10 Show how a producer of flour can benefit from bulk-buying economies of scale. 
11 (a) Identify two stakeholders who are interested in the accounts of a firm. 
(b) Define the following terms:
(i) zero budgeting, 
(ii) cost center. 
12 Distinguish between money market and capital market. 
Section B [30 Marks]
Read the following case study and answer all the questions that follow.
Choice Mobiles Limited
Choice Mobiles Limited is a medium sized public limited company. It manufactures high quality mobile handsets for a niche market in their own country.
The Board of Choice Mobiles Limited, like those of similar businesses, is thinking about how to respond to globalisation. The Board has already decided that they will open retail facilities in both developing and developed countries.
In anticipation of these future developements, Theophilus, the Chief Executive Officer, has carried out a business enviromental analysis. He is positive that the firm’s strengths can outweigh its weakneses and can enable them to take advantage of the opportunities lying ahead. He feels that they cannot even be deterred by the possible threats in the larger market.
Angela, the Marketing Manager, however, thinks that the issue of pricing would be more critical. Currently, prices in the market range from $15 to $100 per model. She gave information on the impact of the recent price changes on the level of demand for their main product and that of their main competitor as shown on the table.
| ||% change in price||% change in demand
|Choice Mobiles Limited's main product||+20||-14
|Main Competitor's product||-20||+24
In light of the new developments, David, the Human Resources Manager, also needs to prepare for the planned international expansion. However, he thinks that it will be difficult to achieve a workforce so loyal and committed as the present one. Most employees have worked for Choice Mobiles Limited for a long time.
13 (a) (i) Calculate the price elasticity of demand for Choice Mobiles Limited’s main product. 
(ii) Comment on your answer in (a) (i) 
(b) Show how Choice Mobiles Limited’s price elasticity of demand is different from that of its main competitor. 
14 Examine the possible factors that the Chief Executive Officer should analyse concerning the business environment. 
15 Discuss the pricing factors that the Marketing Manager should put into consideration when selling their product in the new market. 
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